Nova Scotia (Attorney General) v. Williams

Nova Scotia (Attorney General) v. Williams Court Court of Appeal Date 1996-07-02 Citation 1996 NSCA 134 Docket CA 124250 Judge/Registrar/Adjudicator Hart, Gordon L.S. (Honourable Justice); Freeman, Gerald B. (Honourable Justice) (CA); Hallett, J. Doane (Honourable Justice) (CA) Document Type Decision Decision Content C.A. No. 124250 NOVA SCOTIA COURT OF APPEAL Cite as: Nova Scotia (Attorney General) v. Williams, 1996 NSCA 134 Hallett, Hart and Freeman, JJ.A. BETWEEN: HER MAJESTY THE QUEEN IN RIGHT OF ) Margaret L. MacInnis THE PROVINCE OF NOVA SCOTIA, ) for the Appellant REPRESENTED BY THE ATTORNEY ) GENERAL OF NOVA SCOTIA ) Appellant ) ) - and - ) ) John G. Langley, Q.C. ) for the Respondent RICHARD AND ALICE WILLIAMS ) ) Respondents ) Appeal Heard: ) April 17, 1996 ) ) ) Judgment Delivered: ) July 2, 1996 ) THE COURT: Appeal dismissed with costs to respondent per reasons for judgment of Freeman, J.A.; Hart, J.A. concurring and Hallett, J.A. dissenting. Freeman, J.A. The Respondents, Richard and Alice Williams, developed a successful calf-cow-beef breeding operation at Salt Springs, twenty-three kilometres southwest of New Glasgow, Nova Scotia, on 448 acres of land, half owned and half leased. This was divided into six main sectors of which Sector 3 and Sector 5 were of primary importance to their farming operation and the remaining four were of secondary importance. Sector 3 containing 21.94 acres was owned by the Williams. They leased Sector 5 containing 31 acres from Reid Newport. These two sectors are interval lands adjoining one another and lying between the West River on the southeast and the Trans Canada Highway on the northwest. The combined Sectors 3 and 5 provided a heavy cut of silage in the spring, pasture in the summer and fall, and an abundant water supply. Witnesses frequently referred to these two sectors as the "heart" of the Williams' operation. A major portion of Sectors 3 and 5 was required by the Nova Scotia Department of Transportation for the twinning of the Trans Canada Highway. The Nova Scotia Department of Transportation expropriated 10.5 acres from Sector 3, severing 6.97 acres, and leaving the Williams 4.61 acres. The Department bought the whole of Sector 5 from Mr. Newport for a premium price. It made no move to formally expropriate the Williams' interest in Sector 5. It considered this to be merely a monthly lease which it allowed to lapse. It advised the Williams by letter in the spring of 1995 that they could not depend on harvesting Sector 5 that year because construction was about to start. That was the only notice of termination of their interest. The Nova Scotia Utility and Review Board considered the effect of the loss of the leased sector on the Williams in awarding them compensation of $356,000. This followed an eleven-day hearing in which expert evidence was called by both sides. The amount awarded was based on detailed studies and included land value, injurious affection and economic loss to the farming operation. The key issue on this appeal is whether the Department’s acquisition of the Williams' interest in Sector 5 entitled them to compensation. The appellant stated its grounds 1 and 2(ii) of appeal together as follows: 1. The Board exceeded its jurisdiction by taking into consideration land which was not expropriated in its determination of loss of income, loss of operating efficiencies, and injurious affection. 2. The Board erred at law in its determination of loss of income by: ii) determining the claimant’s increased annual operating expenses on the basis of the loss of land that was not subject to expropriation. There are also issues as to double recovery, mitigation, set-off, accelerated income tax, and special economic advantage. Standard of Review Before considering the appropriate standard of review, it is necessary to consider the nature and purpose of the Expropriation Act, R.S.N.S. 1989, c.156. The Act was revised in 1973 to establish fair compensation as the guiding principle when an individual is required to surrender his property interests for public purposes. That is clearly stated in s. 2(1) under the heading "Purpose of Act": 2 (1) It is the intent and purpose of this Act that every person whose land is expropriated shall be compensated for such expropriation. The key concept of expropriation is defined by Section 3(1)(c) of the Expropriation Act which provides: 3 (1) (c) "expropriate" means the taking of land without the consent of the owner by an expropriating authority in the exercise of its statutory powers. While this is not the only section from which the Board derives jurisdiction, to determine whether it has jurisdiction under this section, the Board must make findings of mixed fact and law as to: 1. existence of land as defined in the Act in an owner; 2. existence of an expropriating authority; 3. a taking of the land from the owner by the expropriating authority; 4. absence of the owner's consent; 5. existence and exercise of a statutory power to take. It is noteworthy that the expropriation process follows two main tracks under the Act. The first is the formal process which begins with the depositing of expropriation documents pursuant to s. 11 in the appropriate Registry of Deeds office and concludes with the determination of compensation after hearings before the Board. The second involves negotiations between the expropriating authority and the landowner in the context of the Act, which usually ends in a negotiated settlement rather than a compensation hearing. An owner can consent to negotiations, and to the eventual settlement, but he cannot stop the taking of his land by withholding consent. The term "consent" used in s. 3(1)(c) must be read in this light. We are advised by counsel that negotiated settlements account for 90 or 95 per cent of land acquired for purposes for which it might be expropriated. A number of other provisions of the Act bear on the context in which ss. 2(1) and 3(1)(c) must be construed. Section 26 establishes the right to compensation for the market value of land or a family home, all reasonable expenses, damages for injurious affection and the value of any special economic advantage. Sections 2 (2),(3),(4) and 3(f) provide special protection when family homes are expropriated. Section 3(i), (j) and (q) provide a broad definition of the property rights which attract compensation. Dislocated owners and those put out of possession receive special consideration under various provisions in s. 27. Business losses are provided for under s. 29. Under s. 35, owners are entitled to appraisal and legal costs prior to the institution of proceedings to assist them in their claims for compensation. On December 14, 1992, the Utility and Review Board Act S.N.S. 1992, c. 11, came into force, providing by s. 3 that the new board assume the functions of various tribunals including the Expropriations Compensation Board and by s. 4 the functions, powers and duties conferred by various statutes including the Expropriation Act R.S.N.S. 1989 c. 156. The deference formerly accorded the predecessor boards as specialized tribunals experienced in their areas of expertise is not necessarily the same deference to be accorded the present Board in matters of expropriation. It is important to keep in mind the purposes and provisions of the Expropriation Act referred to above. In expropriation matters, the Board must consider each question in the context of the Act and practices under the Act; facts and law are closely interrelated. This in turn places an emphasis on the Board's experience and expertise and has relevance to the degree of judicial deference to which the Board is entitled. In considering the appropriate standard of review, the following provisions of the Utility and Review Board Act are relevant: 22 (1) The Board has exclusive jurisdiction in all cases and in respect of all matters in which jurisdiction is conferred on it. (2) The Board, as to all matters within its jurisdiction pursuant to this Act, may hear and determine all questions of law and of fact. 26 The finding or determination of the Board upon a question of fact within its jurisdiction is binding and conclusive. 30 (1) An appeal lies to the Appeal Division of the Supreme Court from an order of the Board upon any question as to its jurisdiction or upon any question of law . . . Therefore, decisions of the Board are protected by a privative clause respecting its findings of fact, and the general rule is that the standard of review is patent unreasonableness. Questions of law or jurisdiction are not so protected; they are subject to a statutory right of appeal, which generally invokes the standard of concurrence or correctness. Questions of mixed fact and law occur with frequency under the Expropriation Act. In the absence of error of law, the Board's findings of mixed fact and law should be entitled the same to deference due to its findings of fact alone, the standard of patent unreasonableness. These general statements are tentative and require closer scrutiny. In Kynock v. Bennett et al. (1994), 131 N.S.R. (2d) 334 Hallett, J.A., considered the standard of review which applies to the Nova Scotia Utility and Review Board under the Planning Act. He stated at page 339: There is an appeal to this court on questions of law or jurisdiction (Utility and Review Board Act, S.N.S. 1992, c. 11, s. 30). An excellent and authoritative review of the law respecting judicial review of decisions of administrative tribunals is that of Sopinka, J., in United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., [1993] 2 S.C.R. 316. . . . Although the Utility and Review Board Act provides for an appeal to this court, the comments of Sopinka, J., as to the approach to judicial review are relevant to the issues raised on this appeal. At p. 331 he stated: The standard of review to be applied to a decision of an administration tribunal is governed by the legislative provisions which govern judicial review, the wording of the particular statute conferring jurisdiction on the administrative body, and the common law relating to judicial review of administrative action including the common law policy of judicial deference. At p. 332 he made a general statement that is applicable to all situations in which a court finds itself reviewing a decision of a tribunal established by statute. Sopinka, J., stated: The legislative provisions in question must be interpreted in light of the nature of the particular tribunal and the type of questions which are entrusted to it. On this basis, the court must determine what the legislator intended should be the standard of review applied to the particular decision at issue, having due regard for the policy enunciated by this court that, in the case of specialized tribunals, decisions upon matters entrusted to them by reason of their expertise should be accorded deference. The statutory provisions to be interpreted in this manner range from 'true' privative clauses which clearly and specifically purport to oust all judicial review of decisions rendered by the tribunal (such as that in U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048) to clauses which provides for a full right of appeal on any question of law or fact and which allow the reviewing court to substitute its opinion for that of the tribunal (as in Zurich Insurance Co. v. Ontario (Human Rights Commission), [1992] 2 S.C.R. 321). The following statement by Beetz, J., in U.E.S. Local 298 v. Bibeault, [1988] 2 S.C.R. 1048 at p. 1086 . . . is accepted as a correct statement of law respecting judicial review when a court is dealing with an allegation that the tribunal, although protected by a true privative clause, exceeded its jurisdiction. He stated: It is, I think, possible to summarize in two propositions the circumstances in which an administrative tribunal will exceed its jurisdiction because of error: 1. if the question of law at issue is within the tribunal's jurisdiction, it will only exceed its jurisdiction if it errs in a patently unreasonable manner; a tribunal which is competent to answer a question may make errors in so doing without being subject to judicial review; 2. if however the question at issue concerns a legislative provision limiting the tribunal's powers, a mere error will cause it to lose jurisdiction and subject the tribunal to judicial review. I cite the foregoing solely for the purpose of illustrating that even in the face of a strong privative clause a tribunal cannot misinterpret a legislative provision limiting its jurisdiction and be immune from judicial review. In the Bibeault decision Beetz, J., stated at p. 1088 that a court in determining the jurisdiction of a tribunal: examines not only the wording of the enactment conferring jurisdiction on the administrative tribunal, but the purpose of the statute creating the tribunal, the reason for its existence, the area of expertise of its members and the nature of the problem before the tribunal. This has become known as the pragmatic and functional approach to judicial review. Beetz, J., went on to state at p. 1090 in Bibeault how important it is that tribunals do not exceed their jurisdiction: When an administrative tribunal exceeds its jurisdiction, the illegality of its act is as serious as if it had acted in bad faith or ignored the rules of natural justice. The role of the superior courts in maintaining the rule of law is so important that it is given constitutional protection: Crevier v. Attorney General of Quebec, [1981] 2 S.C.R. 220. Yet, the importance of judicial review implies that it should not be exercised unnecessarily, lest this extraordinary remedy lose its meaning. These views were recently confirmed by the Supreme Court of Canada in Canada (Attorney General) v. P.S.A.C., [1993] 1 S.C.R. 941 . . . (P.S.A.C. No. 2) where Cory, J., stated at p. 961: In summary, the courts have an important role to play in reviewing the decisions of specialized administrative tribunals. Indeed, judicial review has a constitutional foundation. See Crevier v. Attorney General of Quebec, [1981] 2 S.C.R. 220. Central to the judicial review process is to ascertain the intent of the legislators as to the extent of the jurisdiction conferred on a tribunal and the extent to which the legislators have limited or expanded the scope of review to be exercised by the courts in their supervisory capacity. It is clear from the case law that different tribunals, when interpreting the law, are accorded different degrees of deference with the labour relations boards being accorded the highest degree (depending on the breadth of a privative clause) and human rights tribunals at the lower end of the scale as they are generally not protected by a privative clause of any sort and therefore must be subject to the review by the court on a standard of correctness, not reasonability on questions of law. (Canada (Attorney General) v. Mossop, [1993] 1 S.C.R. 554 . . . at p. 584-585). On questions as to the extent of its jurisdiction, a tribunal must be correct in its interpretation of the statute under which it derives its authority and if it is wrong the courts do not hesitate to interfere even in the face of a strong privative clause (Canada (Attorney General) v. Public Service Alliance of Canada, [1993] 1 S.C.R. 941 . . . ). Pugsley, J.A., considered the standard of review which applies to the Board under the Expropriation Act in Nova Scotia (Attorney General) v. Powell Property Ltd. et al. (1996), 144 N.S.R. (2d) at page 99: Section 30 of the Utility and Review Board Act limits the appeal to this court, from the decision of the Board, to "any question as to its jurisdiction or upon any question of law". An excess of jurisdiction will, of course, occur where an award is made without supporting evidence (Ramage v. Vancouver (City) (1955), 6 D.L. R. (2d) 231 (B.C.C.A.)). If, however, the court is satisfied that "the evidence before the tribunal was reasonably capable of supporting its conclusions, these will not be disturbed unless they resulted from the application of an erroneous principle." In particular, questions as to the competence, credibility and weight to be given to expert testimony are matters for the tribunal (Todd, The Law of Expropriation and Compensation in Canada (2nd Ed., 1992), p. 543). There is a limited analogy between the Board and the role of the Superintendent of Pensions considered by this court in Imperial Oil Limited v. Superintendent of Pensions (1995), 142 N.S.R. (2d) 28 which states: The position of the Superintendent was carefully considered by Clarke, C.J.N.S. In Hawker Siddeley Canada Inc. v. Superintendent of Pensions et al. (N.S.) (1994), 113 D.L.R. (4th) 424 . . . at p. 435: The Act anticipates the Superintendent is one who is skilled in the administration of legislation which calls for a considerable degree of expertise. The Superintendent is appointed by the Government of Nova Scotia on a full time and continuing basis. The Superintendent is charged with the responsibility of administering legislation which by its nature is one of public policy. The interest of the public, in general, and of participating employees, in particular, in the fair, equitable and consistent administration of pension plans is high. Thus the position of the Superintendent cannot be described as ad hoc. It is continuing and on‑going. In this respect, Mr. Justice Sopinka observed in Bradco [United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., [1993] 2 S.C.R. 316.] (at page 336 (S.C.R.)): "... a distinction can be drawn between arbitrators, appointed on an ad hoc basis to decide a particular dispute arising under a collective agreement, and labour relations boards responsible for overseeing the ongoing interpretation of legislation and development of labour relations policy and precedent within a given labour jurisdiction. To the latter, and other similar specialized tribunals responsible for the regulation of a specific industrial or technological sphere, a greater degree of deference is due their interpretation of the law notwithstanding the absence of a privative clause." Bradco is a leading case on the extension of curial deference to tribunals on their interpretation of law as well as on matters of fact. Chief Justice Clarke observed further: Underlying this legislation is a significant and important principle of public policy designed to protect and enhance the quality of life to which the subject employees would be entitled in their retirement years after achieving the threshold requirements of continuous employment in the workplace. Clarke, C.J.N.S., on behalf of this Court, considered the issue in Crossman v. Labour Standards Tribunal (N.S.) (1992), 109 N.S.R. (2d) 274. He stated at 277: This means first, that an appeal is not a new trial. It is not for this Court to hear the evidence all over again and render a fresh decision as though the Tribunal never existed or had no jurisdiction. . . . In this instance, the issues are essentially questions of fact to be determined by the Tribunal. In such a situation the law is settled that where the enabling legislation gives the Tribunal the authority to make final and conclusive decisions of fact, the issue on appeal only becomes a question of law where there is no evidence before the tribunal which can support the findings it has made. . . . There was evidence before the Tribunal in which it could make the findings that it did. Therefore, the issues having been within its jurisdiction, there is no question of law upon which the decisions and findings of the Tribunal can be disturbed. The Imperial Oil case goes on to state at p. 32: In Hawker Siddeley, Chief Justice Clarke considered the standard of review which applies to decisions of the Superintendent of Pensions as follows: Section 89(9) gives the court the authority to review the decision of the Superintendent. In doing so, the court may confirm or substitute. The power on appeal is very broad. However, I agree with Justices Nathanson and MacAdam that in the scheme of the Act, the decision of the Superintendent is entitled to deference. If it is found to be 'patently unreasonable or irrational' it can be set aside. If the Superintendent has acted beyond his jurisdiction in the sense that he has made a decision which is outside the jurisdiction conferred upon him by the Legislature, then the court has the authority to set it aside. That the court may not agree with the decision is insufficient cause, standing alone, to substitute the decision for one of the court's liking. The court is otherwise obliged to respect the decision of the Superintendent as falling within the jurisdiction the Legislature has entrusted to his care, expertise and administration and should confirm it. Thus both Justices Nathanson and MacAdam are correct in determining that this decision of the Superintendent is entitled to deference by the court. The scope of review should be the same as a court would review the decision of a statutory tribunal not protected by a privative clause. . . . That scope of review was considered by the Supreme Court of Canada in Pezim v. British Columbia Securities Commission et al., [1994] 2 S.C.R. 557 . . . , which was decided by the Supreme Court of Canada after Hawker Siddeley. In my view there is no conflict between Hawker Siddeley and Pezim. In both cases the Superintendents were seen as statutory tribunals whose orders were not protected by a privative clause and which were subject to a statutory right of appeal. Iacobucci, J., writing for the court, in Pezim described the standard of review as a spectrum with reasonableness and high deference to the lower court on one end and correctness and low deference on the other end. He described the Superintendent's position as falling between the two extremes: On one hand, we are dealing with a statutory right of appeal pursuant to s. 149 of the Securities Act. On the other hand, we are dealing with an appeal from a highly specialized tribunal on an issue which arguably goes to the core of its regulatory mandate and expertise. . . . Consequently, even where there is no privative clause and where there is a statutory right of appeal, the concept of the specialization of duties requires that deference be shown to the decisions of specialized tribunals on matters which fall squarely within the tribunal's expertise. . . . In my view, the pragmatic or functional approach articulated in Bibeault [U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048; 35 Admin. L.R. 153] is also helpful in determining the standard of review applicable in this case. At p. 1088 of that decision, Beetz, J., writing for the court, stated the following: '. . . the court examines not only the wording of the enactment conferring jurisdiction on the administrative tribunal, but the purpose of the statute creating the tribunal, the reason for its existence, the area of expertise of its members and the nature of the problem before the tribunal. . . .' In summary, having regard to the nature of the securities industry, the Commission's specialization of duties and policy development role, as well as the nature of the problem before the court, considerable deference is warranted in the present case notwithstanding the fact that there is a statutory right of appeal and there is no privative clause. Much of the reasoning cited above applies to the Board, and I would adopt a standard of considerable deference even with respect to law and jurisdiction. In particular instances, the Board's jurisdiction depends upon findings of facts, which are protected by a privative clause. Given the nature of the expropriation process, questions of law are closely interrelated with the facts and derive shelter from the protective provision. When there is evidence before the Board, and it has not erred in principle, its findings should not be disturbed unless they are patently unreasonable. The Williams' Farm The Williams began their farming operation in 1974 when they bought a 143-acre farm in Salt Springs. This property now comprises Sectors 1 and 2 lying south of the West River. After experimenting with various types of farming, they went full-time into beef breeding in 1985. Mr. Williams is now chairman of the Nova Scotia Beef Commission and has served on the Nova Scotia Cattlemen’s Association and on the board of the Canadian Cattlemen’s Association. To start beef farming in 1985, they bought the 80.84 acre Bell Farm lying north of the West River which consisted of Sector 3 and Sector 4. Sector 4, where the Williams' barn and forage storage are located, is north of the Trans Canada Highway, which separates it from Sector 3. The Bell Farm’s maximum usefulness to the Williams depended on their access to the 90 acre property known as the "Old Satchel Farm" which adjoins it and which had formerly been operated with it as a one-unit sheep farm. The Satchell Farm was owned by Reid Newport. Before investing in the Bell Farm, the Williams discussed acquiring the Satchell Farm from Mr. Newport who told them he did not wish to sell it and hoped to keep it in his family. He gave them a renewable three-year written lease and the Satchell Farm became Sectors 5 and 6 of the Williams' operation. The Board accepted Mr. Williams' evidence that he would not have invested in the Bell farm unless he was satisfied he had secured long-term use of the Satchell farm. The lease contained a right of first refusal if Mr. Newport ever changed his mind about selling and his family members did not wish to buy it. If not renewed for three years, the lease was to continue from month to month. The annual rent, originally $1,200 and later increased to $1,500, was well above the norm and reflected the importance of Sector 5 to the Williams because of its situation and the quality of the land. After Mr. Newport conveyed Sector 5 to Her Majesty, the Williams continue to lease Sector 6, which adjoins Sector 4 on the north side of the Trans Canada Highway, for $500 a year. The remaining 130-odd acres farmed by the Williams, less crucial to their operation, are held under unwritten annual leases. They are not part of the six sectors. At the end of 1992, the Williams had 101 market cattle, plus 87 bred cows and heifers. A year later, there were 92 cows and bred heifers, 87 calves and three bulls. The efficiency of the operation required that the cattle be divided into three distinct nodes, or herds, dependent on how they were to be marketed. This in turn was integrated with the use of the land. The farming scheme pivoted around the rich interval land in Sectors 3 and 5 which were described by expert witnesses as the heart or core of the operation. The Sector 5 Interest The three-year lease for the Satchell farm expired in 1988 and was renewed by oral agreement. When it again became time to renew the lease, Mr. Williams and Mr. Newport were aware that the highway was to be twinned. They discussed the matter and in light of the uncertainty, decided not to formally renew the lease but to let it continue "in a verbal way", and payments were made as usual. Mr. Newport described how he came to sell Sector 5 to the Nova Scotia Department of Transportation: I received an offer from them. Rick [Williams] and I had been in touch. The highway was supposedly coming through. Expropriation was talked about. I received an offer from the Province. I believe I sent a letter to Mr. Dunbar indicating that even though - if this came to a settlement, even though it wasn’t under expropriation, I wanted protection under the Expropriation Act concerning my legal fees and appraisal fees being paid for by the government. I received a letter indicating they would do that and I turned the process over to my lawyer. Q. And was it your understanding from that arrangement that you were actually operating under the terms of the Expropriation Act? A. That would have been my opinion, yes. I was not planning - I didn’t sell it for any other reason other than it would have been expropriated. And I guess that’s why I didn’t - just hearing your testimony, I didn’t inform Rick that - to give him right of first refusal. As far as I was concerned, it was not a sale. It was a settlement reached before expropriation which, to me, was different. Mr. Newport had informed the Department of his arrangement with the Williams. The Department required only a portion of Sector 5 for the highway. It agreed to buy the entire 31 acres at a price of $95,000. The additional land in Sector 5, not needed for highway purposes, was of interest to the province because it adjoined a provincial park. The various appraisers who testified agreed that the price paid to Mr. Newport was three times the reasonable price of farm land in the area: $1,000 per acre. The Department then instructed its own appraisers not to consider Sector 5 as part of the Williams’ farming operation. The Board found that Mr. Newport would not have sold Sector 5 except that he was facing expropriation and got a high price; in his mind, it was a forced sale in every sense. "He responded to both the carrot (triple price for land he was not using without litigation) and the stick (expropriation, severance and litigation). The Board believes him." The Board also believed that "Mr. Newport considered the virtual 'expropriation' ended any effect of the refusal option." While the transaction between Mr. Newport and the Department was hardly a typical sale between a willing buyer and seller on the open market, not a great deal hinges on forcing the analogy between this manner of acquiring Mr. Newport’s land and an actual expropriation. The following definitions in s. 3 of the Expropriation Act are relevant: 3 (i) "land" includes any estate, term, easement, right or interest in, to, over or affecting land; 3 (j) "owner" includes a mortgagee, tenant, registered judgment creditor, a person entitled to a limited estate or interest in land . . . 3 (q) "tenant" includes a lessee or occupant occupying premises under any tenancy whether written, oral or implied. Mr. Williams owned "land" as defined by the Act in Sector 5; whether that was expropriated from him is discussed below. Regardless of that answer, Mr. Williams was able to assert a right to claim damages for injurious affection resulting from the province's acquisition of Mr. Newport's land in Sector 5 whether Mr. Newport's land was expropriated or not. Under s. 71 of the Expropriation Act, a minister is authorized in Her Majesty’s name to purchase or acquire land which could be expropriated for any public work, such as the highway project in question. A right to damages for injurious affection of an owner's lands can occur without actual expropriation under s. 3(1)(h) of the Expropriation Act "(i) where a statutory authority acquires part of the land of an owner", or "(ii) where the statutory authority does not acquire part of the land of an owner." Under s. 26(c) "damages for injurious affection as hereinafter set forth" are to be included in the aggregate of compensation payable to the owner of expropriated lands. However, the right to claim damages for injurious affection is not restricted to the owner of expropriated lands under ss. 30 and 31(1): 30 A statutory authority shall compensate the owner of land for loss or damage caused by injurious affection. 31 (1) Subject to subsection (2), a claim for compensation for injurious affection shall be made by the person suffering the damage or loss in writing with particulars of the claim within one year after the damage was sustained or after it became known to him, and, if not so made, the right to compensation is forever barred. What is clear is that before the Department began acquiring land for the purpose of twinning the Trans Canada Highway, the Williams were in lawful possession of Sector 5 with an interest that could have continued indefinitely and which contemplated but did not guarantee an eventual opportunity to purchase it. By the time of the hearing before the Board, the Williams were dispossessed and the Department was claiming absolute ownership of Sector 5. The Williams did not consent to the taking of their land, and the Department contended they were not entitled to compensation. The Department, on behalf of Her Majesty, is an expropriating authority. Section 10 gives Her Majesty the right to expropriate land for any public work which specifically includes highways. The Department argues that the Williams' interest in Sector 5 was not expropriated because it acquired the land from Mr. Newport subject to the Williams' monthly lease, which was permitted to lapse. The Williams were advised by letter in the spring of 1995 that they could no longer harvest the land because highway construction was about to begin. The Department's position is that because of the way it took the Williams' Sector 5 land, they are not entitled to compensation for it. To be sure, a monthly lease affords a tenant little compensable protection. However, the Board did not accept the Department’s argument that the Williams' interest in the property was limited to a monthly lease. It considered the whole picture and made a number of relevant observations in addition to finding that Mr. Newport would not have sold Sector 5 except that he was facing expropriation and got a high price. These included: * Whether or not the right of first refusal in the lease was a legally recognizable right, if Mr. Newport could have sold Sector 5 to any buyer at any time the most likely buyer, given the local market for farm land described by the experts, "would likely have been the Williams at market value." The value of the land for agricultural purposes was as great or greater to the Williams, whose need for it would have set the market value. * "The Williams were able to protect themselves from any sale at market value merely by meeting the market value at the time they were confronted with a sale price backed by a genuine offer. They were at little risk since the general market was soft. Mr. Newport did not want to sell in any event so he would not be actively soliciting sales, and the Williams, unlike the Respondent, could not threaten Mr. Newport with an expropriation." * "Absent expropriation, the Williams had their land management scheme in order, whether it be through ownership, optionship, lease or license so that their farm operations might continue to grow and flourish. Within their community, the Williams had established themselves in a practical area of operations for their beef agriculture operation." * The purchase from Mr. Newport, which in his mind was tantamount to an expropriation, "deprived both Newport and Williams of a mutually beneficial arrangement intended to last well into an indefinite time in the future. . . . At the very least, from the Williams' point of view, the expropriation upset the elegant real estate scheme the Williams had put in place to carry out their life style occupational objectives in setting up their agricultural business operation. . . . The Board regards the total scheme which the Williams put together and made to work. This total scheme was disrupted, perhaps fatally, by the expropriation." * Lot #5 was an integral part of the Williams' operation. It was not readily replaceable. It was sheltered either by an option still valid, or under a practical scheme binding on the parties in their own minds and in practice, which was going to continue uninterrupted for the reasonably foreseeable future. The option ought not to have been ignored in the real estate instructions or in the instructions to the experts. * The Board accepted the opinion of the Williams' experts that there were no satisfactory economic substitute lands to replace any of the interval land. * The same market factors that would affect the future value of the land would affect the Williams' ability to pay. If times were good and the price went up, the likelihood was that the Williams' ability to pay would increase as well. * The lease gave Mr. Newport's family members a right of first refusal prior to the Williams, but there was no evidence they had any real interest in the land and the exercise of their refusal option was not probable. * The Williams enjoyed a good relationship with Mr. Newport and their other neighbours and this would have had a stabilizing effect on their long-term use of Sector 5 in a community "that seems to operate on trust based on good relations and word of mouth transactions." The Board exhibited a sensitive understanding of the arrangements by which the Williams held a large part of their secondary lands, recognizing their pragmatic value: Most of the transactions concerned appeared to be, at best, "gentlemen's agreements" on which both parties relied without question. These less formal arrangements appeared to be the custom in the area. . . . From a practical point of view, given the culture and environment in which these transactions occurred, these arrangements worked well for all parties concerned. The Board concluded that in the absence of unforeseeable factors such as expropriation, the Williams' possessory interest in the property would have continued as long as Mr. Newport owned the land, and there was no foreseeable probability that he would sell it. If Mr. Newport had decided to sell at market value, there was a likelihood he would have sold to the Williams. That is, if the playing field remained level, their interest might have become permanent. The Department’s purchase of Mr. Newport’s land with public money at triple its value did not occur on a level playing field. In my view, the Board made a finding of fact which was not patently unreasonable, that the Williams' interest in Sector 5 was far more substantial than a mere monthly lease. This interest meets the definition of "land" in s. 3(1)(h) of the Expropriation Act. If it was taken from them by an expropriating authority without their consent, the Board was correct in compensating them for it. The Williams meet the definition of "tenant" which is included in the definition of "owner" and their interest in Sector 5 meets the definition of "land". Her Majesty is an expropriating authority with statutory powers under s. 10 to expropriate lands for highway purposes. The Williams' Sector 5 land was taken without their consent. In my view, the manner in which the Department took it meets the spirit and intent of the definition of expropriation contained in s. 3(1)(c), and it was not unreasonable for the Board to find them entitled to compensation. While it appears the Department made some effort to avoid the appearance of an expropriation, for instance by not including Sector 5 in the formal expropriation documents it filed, it is a sophistry to consider that an expropriating authority can avoid the duty to pay compensation for expropriated land by sidestepping procedural safeguards enacted for the benefit of landowners. That cannot change the substantive nature of what occurred: the province took the Williams' land without their consent, and that is an expropriation within the meaning of the Expropriation Act. In my view, the Board was within its jurisdiction in considering the effect of the taking of the Williams' Sector 5 land in assessing compensation for the effect of the loss of the interval lands on the Williams' farming operation. It is not necessary to consider whether the Board's jurisdiction to order compensation might also be founded in other provisions of the Act such as those dealing with injurious affection. Mitigation Ground of appeal 2(i) is as follows: 2. The Board erred at law in its determination of loss of income by: (i) failing to consider the claimant's duty to mitigate; . . . The Appellant asserts that: The Appellant submits that once the Claimants became aware of the impending expropriation and acquisition of leased lands, they had a duty to mitigate their damages. This "duty" is described by Todd as follows (at p. 318): The duty comprises three rules namely that the claimant (1) cannot recover for avoidable damage, i.e. all reasonable steps must be taken to mitigate damage; (2) can recover for damage incurred in taking reasonable steps to mitigate even if the resultant damage was greater than it would have been had no mitigating steps been taken; and (3) cannot recover for damage which is in fact avoided by mitigation. Mr. Williams testified that he had made an effort to mitigate and had "attempted to use land in the neighbourhood that shows any sort of use or development potential for my operation to help get me out of this jam." The available land tended to be in small, scattered lots and there was little as fertile as Sectors 3 and 5. The Appellant argued that because Mr. Williams had not yet had to reduce the size of his herd, he had successfully mitigated his loss and was unable to prove loss of income. However, the Royal report was based on the loss of land having the capacity to support some 35 cow-calf units on a long-term basis. That report considered the various alternatives open to the Williams and failed to suggest a realistic means for mitigating the loss. Prior to the hearing, Mr. Williams had had partial use of the lands in Sectors 3 and 5 and was facing his first summer without it. We are facing a very serious situation. . . . I have considerable doubt as to whether I'm going to be able to remain in business. And if I am able to remain in business. . . . I would dismiss this ground of appeal. Double Compensation The Appellant's third ground of appeal is that: The Board erred at law by awarding damages for loss of operating efficiencies in addition to loss of income thereby infringing the common law principle prohibiting double compensation. The basic contention of the Williams, which the Board accepted, was that the interval lands in Sectors 3 and 5 was so crucial to their three-node beef-breeding operation that their availability added disproportionately to the value of the remainder of the farm for this purpose, and their loss disproportionately diminished the value of the remainder. That is, the value of the interval lands to the farm as a whole, configured as it was, could not be valued by the price it would bring per acre on the open market. The Appellant argues: The appellant submits that when an owner has been fully compensated for the market value of the land taken, including an award for loss of income, that compensation should be used to offset any additional costs as a result of the operation. In Regehr et al v. The Queen in Right of Alberta (1988), 39 L.C.R. 260, the Claimants had put forward a demand for compensation based, in part, on the costs of accommodating a herd of cattle on a reduced land base. In denying this portion of the claim, the Board held (at p. 270): . . . The Board accepts that the Owners will be unable to replace the land taken. However, the compensation paid therefore is sufficient to pay for additional feeding and bedding costs if that option is chosen. With respect, the Regehr case refers to a reduction in acreage of lands of equal value, and does not meet the issues raised by the respondents' contention that Sectors 3 and 5 are the heart of the operation, the loss of which disproportionately diminishes the whole. However, the Appellant also argues: It is submitted that a review of the expert evidence clearly indicates that the Claimant was compensated twice for the same loss. The factors relied upon for the award of "loss of operating efficiencies" are substantially similar to those mentioned under the heading "loss of income." The expert appraisals of the Williams' farm and the effect of expropriation consists of a valuation of the lands as such by Arthur Speed, a real estate appraiser with Hardy Appraisals, with an attached report on farm losses and disturbance by S. G. Ryle and Associates Ltd., Agricultural Consultants and an executive summary prepared by Paul Gervason, an agricultural agronomist. The Board compared the qualifications and approaches to valuation of Mr. Speed and his experts with those of experts called by the appellant. It clearly preferred the former because it treated the farm as a whole rather than a conglomeration of parts: Mr. Speed, in his overall approach with his colleagues, treated the farm as an integral whole, without adequate comparables, thus requiring the modified technique that he used to obtain his before and after values. This approach recognized that the Claimants' farm (set up as it is), resulted from slow, long-term land acquisitions by purchase, lease, and by what the Board would call for lack of a better name, "license". The Claimant's efforts amounted to a land gathering so configured as to allow the farm to exist as an integral whole, meeting the changing objectives of the claimants, and being worth more in that condition as a unity, than the sum of all its parts when valued individually. The farm, considered as a single entity was worth more than the total of its constituent parts. The Board Mr. Speeds' valuation Summary, confined to the lands actually owned by the Williams in Sectors 1, 2, 3 and 4 is as follows: Summary Value of Property Before Expropriation $183,900 Value of Property After Expropriation $128,300 Total Loss in Property Value $ 55,600 Breakdown of Loss Value of land taken (10.36 ac. @ $1,000/ac.) $10,360 Land Severed (6.97 ac @ $1,000/ac.) $ 6,970 $17,330 Injurious Affection to the Remainder Loss to home farm Sectors 1 & 2 $21,000 Loss to feed tanks $ 5,400 Loss to farm area west of TCH $11,900 Total Injurious Affection $38,300 Total Loss in Property Value $55,600 The most significant item in the compensation package awarded by the Board was $233,837.76 for "loss of income from lands in the taking by expropriation". A further amount of $46, 767.55 was awarded for loss of operating efficiencies. The third ground of appeal focuses on the possibility of an overlap between loss of income and operating efficiencies, but land value must be considered in this regard as well if the figure for total loss in property value reflects the loss of an income component. The Ryle report contains a detailed analysis of the effect of the loss of Sectors 3 and 5 on the productivity of the Williams' operation: In essence this particular piece of land may be regarded as the "profit centre" of the farm operation which derives particular benefit from its high inherent productivity, strategic location and flexibility allowing it to be used for pasturage, silage or hay production depending on the needs of the farm, weather conditions, etc. - characteristics which no other parts of the farm offer. The basic calculation is that loss of the interval land would reduce the number of cow-calf units the Williams' farm could sustain by 33 to 38 units, resulting in a loss of income of $11,700 to $13,400 per year. The gross income of the farm minus variable costs was $27,500 in 1992 and $29,300 in 1993. Various alternatives were considered. Acquisition of replacement land was not considered feasible because none was available, and even if it were, a nearby but non-contiguous piece would be a major disruption to the farm system "in the greater transportation distances for forage and manure and the need to transport cattle to maintain the intensive rotational system now being practiced." Direct purchase of feed was not considered feasible because of the cost and lack of availability in economic distances. There were no significant opportunities to increase on-farm feed production. Purchase of silage from distant locations would not be practical because of the expense of the necessary mechanical handling equipment. A move to another farm was not considered an economically viable alternative. Development of a new node off the present farm would cost almost $200,000 which would increase to $290,000 with interest and foregone profits. Good quality hay could be purchased and stored in the barn for $110 to $120 per tonne or an annual cost of $8,700 to $12,300. After considering the alternatives and means of increasing efficiencies, the Ryle report concluded that a $15,000 annual lost income figure was appropriate and applied a formula to arrive at a total figure for the 20-year period before Mr. Williams reaches retirement age of $233,837.76. Loss of operating efficiencies was considered under a separate heading. These included partial redundancy of the present bar and feeding complex, wastage and increased cost for manure spreading, use of a greater proportion of hay instead of silage in the feed mix would reduce returns and add costs; trucking, fencing and other costs; taking cattle for summer pasture; the need to alter fencing in Sectors 4 and 6, and diseconomies of scale. The report recommended that direct losses should be increased by at least 20 per cent or $46,767.55 to take these factors into account. The hay-silage question was the only item under the heading of efficiencies which was also considered under lost income. Different aspects of the problem were considered, and I am not satisfied that the Board committed an error of law resulting in double compensation in adopting both recommendations. Both of these headings are "reasonable costs, expenses and losses arising out of or incidental to the owner's disturbance as hereinafter set forth" in s. 26(b) of the Expropriation Act. The Ryle report constituted evidence before the Board, and it was not a patently unreasonable error of fact for the Board to adopt it. The next question under this ground of appeal is whether the land value arrived at by Mr. Speed and adopted by the Board overlapped with any of the factors for which compensation was awarded for lost income or reduced efficiency. Mr. Speed allowed $17,330 for the 10.36 acres taken and the 6.97 acres severed at $1,000 per acre. This reflects the inherent value of the land separate and apart from its income producing capacity considered by the Ryle report. The appellants' experts, in a report criticizing the Speed, Ryle and Gervason reports, suggested that if the Williams had been able to use the land for providing an income, they would not have been able to sell it until after it had served their purposes in twenty years' time; therefore, its value should be discounted by an interest factor. The Board did not accept this argument. Mr. Speed's summary of his analysis of the "Highest and Best Use" of the land explains his approach to injurious affection: Before the Taking Fully integrated 3 herd cattle farm. After the Taking Sectors 1 and 2, single herd cattle of hobby farm. Sector 3, small remainder parcel. Holding for speculative purposes. Sector 4, pasture and woodland plus hay barn with reduced utility for use in conjunction with another farm operation or as a hobby farm site. In breaking down his figure, he attributed $21,000 to the loss to the home farm Sectors 1 and 2, $5,400 to loss to the feed tanks, and $11,900 to loss to the farm area west of the Trans Canada Highway. In my view, there is possible overlapping between the redundancy factor respecting the barn and feeding complex referred to in the Ryle report relating to loss of operating efficiencies and the feed tanks and reduced utility of the hay barn referred to as injurious affection in the Speed portion of the appraisal. The appellant argues that these and other factors appeared in the Ryle report both under loss of income and lost efficiency. They do not, however, appear to have been included in the loss of income calculation. Any such overlap would appear to be of relatively minor financial import when compared with the total compensation awarded, although it may well have been an error by the Board in its appreciation of the evidence. I am mindful, however, that the Board heard the detailed explanations of the various witnesses as the hearing unfolded and may have been satisfied on this point. I am not satisfied that double compensation has occurred, but if it has, it is within the range of the considerable deference to which compensation awards by the Board are entitled. I would dismiss this ground of appeal. Set-off The fourth ground of appeal is that: 4. The Board erred at law when it failed to consider the claim for set-off against damages for injurious affection as required pursuant to Section 32 of the Expropriation Act. That section provides: 32 The value of any advantage to the land or remaining land of an owner derived from any work for which land was expropriated or by which land was injuriously affected shall be set-off only against the amount of the damages for injurious affection to the owner's land or remaining land. The appellant's position is that the portions of Sector 3 remaining to the appellants, the severed 6.92 acres and 4.61 acres beside the river, will increase in value because they are at a Trans Canada Highway exit and will benefit further from the planned relaxation of access limitations to land so situated commands a considerably higher price than farm land. The Appellant claims a total set-off of $29,965 calculated at $6,500 per acre. The respondent argues that the land in question is in a more rural setting than examples discussed in evidence and that it is unknown whether there would be a commercial market for it. The Board made no allowance for set-off in its compensation award. In my view, this was an exercise of the Board's jurisdiction within the range of the deference which should be accorded to it. I would dismiss this ground of appeal. Accelerated Income Tax The fifth ground of appeal is that: 5. The Board erred at law by retaining jurisdiction to deal with "accelerated income tax". In its decision the Board stated: "In the expropriation hearings conducted to date by this panel of the Board, the Board has in each case perceived a need to reserve in its "final" decision certain aspects of the claim for future determination. As a matter of finality these reservations should be non-existent or kept to the bare minimum, if it is not possible to exclude such reservations. Mr. Ryle tried to have the Board reserve on the matter of income tax impact on the award through the acceleration of income tax. The Board has heard no attempt to quantify the impact, if any. . . . An award for lost future income presumably involves income tax considerations. The impact of taxation cannot be known with certainty until payment of compensation and its assessment by the taxing authority. Neither the Expropriation Act nor the Utility and Review Board Act preclude the Board from retaining jurisdiction to deal with tax concerns should they arise, and it is reasonable that the Board should do so. I would dismiss this ground of appeal. Special Economic Advantage The sixth ground of appeal states that: 6. The Board erred at law by basing its Order of compensation on the concept of "special economic advantage." The order of the Board states: 1. The compensation due to the Claimants from the Respondent is the aggregate of the market value of the land and the value to the owner of special economic advantage to them arising out of or incidental to their actual occupation of the land in a gross amount of $346,651.67. The appellant argues that "neither in the Notice of Hearing nor in any of the evidence presented to the Board by the Respondents was a claim for special economic advantage advanced." Section 27(3)(b)(ii) provides: (ii) the costs, expenses and losses arising out of or incidental to the owner's disturbance including moving to other premises but if such cannot practically be estimated or determined, there may be allowed in lieu thereof a percentage, not exceeding fifteen, of the market value determined as set forth in subclause (i), plus the value to the owner of any element of special economic advantage to him arising out of or incidental to his occupation of the land, to the extent that no other provision is made by this clause for the inclusion thereof in determining the value of the land expropriated. The appellant cites Whynot v. Town of Bridgewater (1982), 53 N.S.R. (2d) 47 at p. 60 (NSECB) which quotes Arpro Developments Limited v. {Province of British Columbia (1977), 15 L.C.R. 97 at p. 101: . . . This special advantage must be more than mere potentiality or adaptability. It must be an advantage that others, whoever they might be, using the property in the same general way would not have, and thus would not be included in the market value as property ascertained. Potentiality and adaptability should be properly considered in ascertaining market value on the proper basis of the highest and best use of the property. While it might be argued that the Williams' beef operation resulted from the unique combination of their interests, energies and experience with the characteristics of the land, it is hardly necessary to do so. The Board's language mirrors that of s. 27 but it does not appear to have been intended in a restricted or technical sense. The Board's decision itemizes the components that made up the total award, and nothing was included for special economic advantage. I would dismiss this ground of appeal. The sixth ground of appeal, "that the Board erred in making findings of fact not supported by the evidence" has been withdrawn. Conclusion I would dismiss the appeal with costs to the respondent to be taxed on a solicitor and client basis. Freeman, J.A. Concurred in: Hart, J.A. HALLETT, J.A.: (Dissenting) I cannot agree with Justice Freeman that the appeal ought to be dismissed. I have two concerns: (i) there appears to be an element of double recovery in the award; and, (ii) the Board made a patently unreasonable finding of mixed fact and law that underpins the entire award. The Board's award consists of three principal components: (i) compensation for the land taken and severed, plus an award for injurious affection to the remainder of the farm as calculated by Mr. Speed in the total sum of $55,600; (ii) compensation for the loss of income that would be suffered by the Williams over the next 20 years in the operation of the farm as a result of the impact the expropriation had on the operation - $233,837.76; and (iii) compensation for loss of operating efficiencies by reason of the diminished capacity of the remaining property to accommodate sufficient nodes to be a cost effective beef-cattle operation - $46,767.55. It seems to me that the award should either be calculated on the value of the land taken plus an amount for injurious affection to the remainder as calculated by Mr. Speed or on the loss of income approach (the total of (ii) and (iii) above) as calculated by Mr. Ryle but not both. Income from a farm is income from a business that utilizes real estate. The income approach is a realistic method of calculating the value of a business of which real estate is the principal working asset (apart from good management); for example, a shopping centre. Leaving aside the comparable sales approach, the income approach to valuation of real estate is preferred over an approach based on replacement cost less depreciation/obsolescences. I would think that a valuation of the loss arising as a result of the taking of part of the Williams' farm operation ought to be calculated by application of the income approach as it is a business that revolves around the utilization of real estate. If such an approach produces a greater valuation than alternate approaches, an income approach with respect to efficiently operated farms, in effect, recognizes the management effort of the farm operator. Efficient operation of a farm is an appropriate consideration that ought to be recognized in the award. Therefore, the loss arising out of the expropriation would thus be fully compensated by payment of the $233,837.76 plus the $46,767.55. Although I have a problem with the award made by the Board which is calculated by accumulating the loss calculated by both Mr. Speed and Mr. Ryle, the issue has not been raised on the appeal. Presumably, the cumulative calculation of the loss does not concern the appellant. Therefore, my concerns in this area are not fatal to the award as calculated by the Board. With respect to my second concern, I do not agree with the Board's finding that Williams, absent expropriation, "had their land management scheme in order". The Williams were only month to month tenants of Newport. Therefore, their tenancy interest in a core area of the farming operation (Sector 5) could have been terminated at any time by Mr. Newport on one month's notice. The Williams would have had no recourse. It matters little that the Williams would likely have been prepared to pay market price or more had Sector 5 been put up for sale. There is no guarantee that, for whatever reason, Newport or his family, if the family succeeded to ownership of the land, would not have terminated the Williams' monthly tenancy. When possession of part of the core area of the farm is possessed only by way of a short-term tenancy, the termination of which can result in such a substantial loss of profit as calculated by the Board, the land assembly is neither in order nor elegant. On the contrary, it is very fragile. Justice Freeman has reviewed the findings of the Board that led to the Board's conclusion that the Williams' interest in Sector 5 would have continued indefinitely in the absence of unforeseeable factors such as expropriation. I need not repeat those findings. The finding that the tenancy interest would have continued indefinitely is a matter of speculation that is not supported by the realities of the situation; Williams had a month to month tenancy with respect to Sector 5. They had no enforcible right that would have allowed them to continue use of Sector 5 for the 20 years that formed the basis of calculating the loss of income component of the award. The Board's finding that the lease arrangement with Newport would have continued indefinitely is a patently unreasonable finding given that it could have been terminated at any time on one month's notice. As the Board's finding goes to the very foundation on which the loss of income is calculated, the award ought to be set aside. I would allow the appeal and remit the matter to the Board to determine the appropriate compensation that ought to be payable to Williams on the basis that his interest in Sector 5 was that of a monthly tenant. Hallett, J.A. C.A. No. 124250 NOVA SCOTIA COURT OF APPEAL BETWEEN: HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF ) NOVA SCOTIA, REPRESENTED ) BY THE ATTORNEY GENERAL ) OF NOVA SCOTIA ) Appellant ) - and - ) REASONS FOR ) JUDGMENT BY: RICHARD AND ALICE WILLIAMS ) ) FREEMAN, J.A. ) Respondents ) HALLETT, J.A. ) (Dissenting) ) ) ) ) )